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Ways and Means Signals Readiness to Base Medicare Payment on Quality Performance

March 15, 2005—Ways and Means Health Subcommittee Chairwoman Nancy L. Johnson, R–Conn., signaled at a House hearing Tuesday how she aims to reform Medicare payments to physicians, while stressing that her thinking on the matter is still "embryonic." The key elements: Get rid of the "Sustainable Growth Rate" (SGR) system that has lined up physicians for big annual cuts over the next several years and replace it with a system that rewards doctors who perform well on specific measures of quality care.

Johnson indicated she doesn't have the luxury of waiting until performance measures and the data systems to gather them have been perfected. Repeal of the SGR "is the only possibility," Johnson said at the hearing. "It's unfortunate that we have to do this two years in advance of the technology."
The message of the hearing is that performance measures are ready, a GOP aide said. That may be less the case with physician care than with other forms of care, but the aide said doctors may have to report data on quality of care next year to qualify for higher payments, with income for the year after based on that data. Decisions on the issue haven't been made, the aide said.

Hospitals were recently given higher Medicare payments to report data on quality performance measures, which will soon be released publicly. Performance data also is available for skilled nursing facilities, home care agencies, and managed care plans. One possible scenario is that Medicare payments to those sectors of health care will be based on performance data in fiscal 2006, with doctors coming under such a system in fiscal 2007.

Johnson hinted at the possibility of a one-year fix of physician payment while a more permanent system is designed, but said she isn't ready to throw the towel in on speedier action on the more lasting changes. "My belief is that if you get the right bill at the right time, you will find a way to fund it," she said. A "Dear Colleague" letter by Johnson estimated the cost of a one-year fix—erasing projected payment cuts to physicians in fiscal 2006 and replacing them with a 1.5 percent increase—at $11 billion over five years.

Johnson expressed concern at the hearing about several aspects of performance-based payment to physicians, including the problem of patients who won't comply with doctors' instructions despite their best efforts, and the reliance in part on administrative claims data rather than solely on clinical data to measure performance. Witnesses told Johnson that those problems are manageable.

But one of those witnesses, Jeffrey Rich of the Society of Thoracic Surgeons, warned against carving payments to reward higher quality out of the existing pool of doctor payments rather than adding to the pool. A budget-neutral "tournament" approach that rewards winners at the cost of lower payments to losers could harm care to Medicare beneficiaries, lessen savings, and stifle sharing of best practices among doctors to improve care, he said. The Medicare Payment Advisory Commission has recommended the budget-neutral approach to paying for performance.

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